NZ: Weaker headline GDP masks surging domestic demand – HSBC

New Zealand GDP growth slowed to 2.5% y-o-y in Q1 2017 (market had 2.7%) notes Daniel Smith, Economist at HSBC and the main driver of the weaker print was a drop in construction activity and exports.

Key Quotes

“Despite these factors, domestic demand remained very strong, up 4.8% y-o-y, driven by household consumption and business investment. The weakness is also expected to prove temporary. We expect overall growth to bounce back to an above-trend pace in Q2, when construction is likely to rebound and Easter holidays and the Lions rugby tour boost the tourism sector significantly. We see the RBNZ to be on hold in 2017 and lifting its cash rate in Q1 2018.”